Should we build a bridge across Knik Arm?

* Some explanatory text about this web site will be coming soon,
here. *

Is the proposed Knik Arm Bridge a good idea or a "Bridge to Nowhere"?
Who will benefit and who will be harmed if the bridge is built?
Are there other alternatives that should be considered?
What will the bridge cost and who will pay for it?

This website provides factual information and documentation to answer these questions.

Archive page one

Boondoggle Index – Knik Arm Bridge by the Numbers

April 11th, 2016

There are over $140 million in unobligated funds
for the Knik Arm Bridge stashed away in past capital budgets
that are now in play. Those federal and state funds can pay for
approximately $275 million in transportation projects this construction
season (state funds get an approximately 10:1 federal:state match). It’s
time for the legislature to take those funds away from the KAC
boondoggle and reassign them to this year’s capital budget for
transportation projects.

Firm that made “aggressive assumptions in your
traffic and revenue study” cited in “suspending” further review of KAC
loan request in 2/9/16 letter from by Chief Financial Officer of US
Department of Transportation 7:

Minimum number of projects nationwide where actual
traffic and toll revenue was about half of what CDM Smith had projected,
resulting in projects that declared bankruptcy or had forced debt
restructuring 9:

4

Population estimate by HDR for Point MacKenzie (west side of bridge) in 2035 Mat Su Transportation Plan 10:

After
several negative comments from the Army Corps of Engineers during the
EIS process, KABATA first formally applied for Army Corps of Engineers
404 Permit in September, 2011-pg. 35 (pg 31 on the sheet) http://www.akleg.gov/basis/get_documents.asp?session=28&docid=8512.OR: Archived PDF HERE [13MB Pdf same document as note 3]
KABATA Board minutes since 2014 reflect staff predictions that NMFS
permit expected “within months” “nearing decision”, and staff “hopeful.”
NMFS permits necessary before Corps and Coast Guard permits. The
permit was discussed at the most recent KABATA Board meeting on
11/11/15, but that meeting ended up being only a “discussion” because
there were insufficient members for quorum. ↩

On Feb 9, 2016 the US Department of Transportation turned down a
Letter of Interest loan application for a $378 million TIFIA loan and
$15 M TIGER grant. (See TIFIA letter here).
By the terms of the passed KABATA Bill HB 23, the necessary state
bonding for the project was contingent upon receipt of a low cost 3.5 %
federal loan with no interest payments for five years for one third of
the project costs. This is at least the seventh TIFIA application
KABATA/DOT has submitted and it has yet to advance past the letter of
interest initial review stage.

In its review of the KABATA/DOT application, TIFIA CFO Shoshana Lew
cited “aggressive assumptions in your traffic and revenue study” in
informing KABATA/DOT project financial officer Kevin Hemenway that TIFIA
is “suspending review” of the application since the application could
not meet “(US)DOT underwriting standards.” Many of the aggressive
population and traffic count assumptions cited by TIFIA were documented
in the 10/13/15 post below and are familiar to readers of this blog over
the past five years. Per the state checkbook, in the past three years,
KABATA/DOT has directed at least $2,242,636.04 to two major contractors
for the new numbers – which TIFIA has now rejected: CDM Smith of
California (the same traffic and revenue consultant criticized in the
2013 LB&A Audit of the project) and Cardno, Inc. of Portland,
Oregon.

Some legislators may find the timing on the delayed release of the
loan rejection news to be curious. The TIFIA rejection letter to Kevin
Hemenway was dated February 9, 2016. On February 16 Government Hill
Community Council President Stephanie Kesler requested from the Director
of the Knik Arm Crossing Project, all recent correspondence from TIFIA
to KABATA/DOT. On March 9th, the Director made the February 9 letter
available to Kesler.

Both houses of the legislature have now passed their version of the
DOT operating budget for next year and the two versions sit in
Conference Committee. The capital budget has yet to pass either house
and the Department of Transportation lacks the 9% matching funds
necessary to use all the federal funds available on July 1, 2016. So,
the big question is: Will legislators keep their $168 million commitment
to the bridge that now has no finance plan or will those funds be made
available to fund additional projects and increase jobs this
construction season?

AKDOT (nee KABATA) applies for Federal Loans and Grants

October 13th, 2015

Walking back his January, 2015 decision [Online at Juneau Empire OR archived copy here]. (PDF 70kb)
to halt spending on the megaprojects of the Juneau Road, Susitna Dam,
and the Knik Arm Bridge, Governor Walker in July amended his earlier
administrative order to allow further spending on the projects (see here at ADN OR archived copy here. (PDF 111kb) and here at ADN OR archived copy here. PDF 106kb) for details).

The Governor’s decision allows the Knik Arm Bridge and Toll Authority
(KABATA) project team (now housed in the Alaska Department of
Transportation and Public Facilities (AKDOT) to apply for a $378 M
federal TIFIA loan and a $15 M federal TIGER grant that could launch
what AKDOT estimates is a $1.15 Billion project. If the federal money is
acquired, 2014 Legislation allows the project to move forward requiring
only the approval of the state’s bond committee. Click here[ Dead link- the KABATA website is no longer online ]. for the AKDOT/KABATA project letter of interest application.

Knik Arm Crossing proponents state that Toll Revenues will be enough
to pay back the TIFIA Loan. They also predict that toll revenues will
eventually be high enough to make the State-Issued Bonds payments
(although AKDOT/KABATA does admit that initially, the state will need
cover the bond payments).

In stark contrast, we believe that analysis shows that toll revenues will be approximately only one quarter
of the revenues predicted by AKDOT/KABATA. With just one quarter of
the estimated tolls coming in, the Knik Arm Bridge will require annual
subsidies from the State of Alaska to pay for: Operations &
Maintenance, TIFIA loan payments, and servicing of the State-issued
Bonds.

Below is a list of the AKDOT/KABATA toll revenue forecast flaws:

The Knik Arm Bridge traffic estimates performed for the Wasilla
Bypass project were predicted to be 9,000 Average Daily Trips (ADT) in
2035, versus 36,000 ADT predicted by AKDOT/KABATA. 9,000 average trips
is one quarter of AKDOT’s/KABATA’s estimate and is also what we predict.

AKDOT’s/KABATA’s population forecasts for the Point MacKenzie area
are 80% higher than forecasts performed for AKDOT’s Wasilla Bypass
project.

AKDOT’s/KABATA’s population estimates rely on growth assumptions
that have not yet occurred in the Mat-Su Borough, and that will
significantly raise taxes and raise the price of housing in the Point
MacKenzie area.

AKDOT’s/KABATA’s previous population and employment predictions used wildly different assumptions than their current “model”.

AKDOT’s/KABATA’s financial plan still relies on toll revenues from
traffic volumes than can only be accommodated by a 4-lane bridge. But
the costs in the financial plan reflect the only the costs of building a
2-lane bridge.

KABATA/ADOT Application Predicts 60% More Growth in Mat Su than State Demographer

Whether the state can pay off the proposed federal TIFIA and TIGER
loans and $287 M in state bonds needed to finance the project, depends
largely on how many people live near the Bridge and are willing to pay a
one-way $5 toll (rising 2.5% a year). The population estimates performed by AKDOT/KABATA [ Dead link- the KABATA website is no longer online ].consultants included in the federal application, is for 207,888 people in the Mat Su Borough in 2040. (p. 25 ).

Again, in stark contrast, Eddie Hunsinger, the Alaska state
demographer, in April 2014, projected 166,338 people in the Borough in
2042. Also, the Anchorage Metropolitan Transportation Solutions (AMATS)
adopted a 2040 population estimate of 155,000 from a McDowell report to
be used for the upcoming Anchorage transportation plan.

With about 98,000 people in the Mat Su Borough today, the population figure used for the federal loan application projects over 60% higher growth rate in the Borough in 2040 than either the state demographer or AMATS. Click here for visuals
developed by ISER’s Scott Goldsmith and Jamie Kenworthy illustrate the
large differences between the Bridge proponent’s population number and
other sources.

“Futuristic Concepts”, Quite Different from Reality

Neither the state’s official population projection nor the AMATS
projection was provided to the federal TIFIA loan officials by
AKDOT/KABATA. However the application included a “poster[ Sadly, this is a Dead link- the KABATA website is no longer online].,”
of a “vision” of proposed “townsites” near the Bridge from a February
2014 study paid for by the Mat Su Borough. The disclaimer included on
that poster states: “This map illustrates a futuristic concept to be
used for discussion and generalized planning purposes only.” The poster
indicates the difficulty that AKDOT/KABATA has in getting the
population density that they need, using the lot sizes that are typical
for the Borough.

Outside of the Palmer/Wasilla core area, almost all of the Mat-Su
Borough has been and is being developed using well and septic systems
that require a minimum 1 acre lot size. To pack enough people near the
Kink Arm Bridge (where it actually might make financial sense to pay a
toll instead of using the free Glenn Highway), AKDOT/KABATA is instead
predicting that the vast majority of new homes being built will have 2, 3
or even 5 dwellings per acre. There was some additional capacity built
into the water treatment plant and sewage treatment plant for the Goose
Creek Correctional Center, but it is clear that the available capacity
would not be enough to support what is envisioned at the Point MacKenzie
townsite. The poster also indicates that the Mat-Su Borough and the
state (along with private developers) would be responsible for the costs
of building additional roads, schools, water treatment and sewer plants
necessary to support the population density projected by AKDOT/KABATA.
Since the Mat-Su Borough has struggled to pay for updating their current
sewage treatment plants, it is highly unlikely that Mat-Su voters will
authorize the tax increases to pay for the 6 or 7 new water and sewer
treatment plants needed for this “futuristic concept” to come true!
Unfortunately for AKDOT/KABATA, those small lots and higher costs take
away the major reasons people move to the Mat-Su Borough, cheaper
housing costs, and a bigger piece of land to call your own. The need for
new schools (Fire & Police Stations also) out on Point MacKenzie
well before there is enough population to fill those schools will result
in higher taxes in the Mat-Su Borough, further dampening growth rates.

We have previously pointed out the number of wildly different
scenarios that AKDOT/KABATA and their consultants have created over the
years to pump up needed toll revenues. For example: In 2012, we
identified a striking inconsistencies in KABATA’s job predictions The
estimate of the jobs in 2035 in the same two Traffic Analysis Zones
(TAZ) on the Mat-Su side of the Bridge, was 13,828 in their 2011
prediction, but only 6,740 jobs in their 2007 prediction. And there was
no explanation of the difference.

So where did that inexplicable doubling of jobs come from between
2007 and 2011? In 2007, KABATA forecasted Mat-Su’s 2030 population at
250,700? But in 2011 they forecasted the population at 200,000 in 2035 –
a decrease of 5,000 even with an extra five years. So, with less
population, but still needing to show high traffic counts, it appears
that KABATA’s 2011 forecast manufactured a doubling of jobs at Point
MacKenzie in order to justify both north and south bound traffic
crossing the bridge. Assuming that there will be high levels of 2
way-traffic to “go to work” and go shopping at a massive mall and or to
go to work at a huge new business center, was clearly an attempt to
justify their predicted high toll revenues. The 2007 job estimates even
included a Mall 2.4 times the size of the Dimond Center.

It is likely that reality will look different, because those same two
TAZ zones are in the area at Point MacKenzie currently set aside for
heavy industrial use. Those millions of square feet of retail shopping
areas are completely incompatible with the Point MacKenzie industrial
Special Use District (SPUD) that the Mat-Su Borough established in 2011.

That SPUD plan outlines land use consistent with the Pt. Mac Bulk
Commodities Port: mineral and forest products processing, a
petrochemical plant, metal fabrication for oil and gas modules, laydown
yards to store pipe for the gas pipeline, power generation and other
manufacturing industries. A possible liquefied natural gas (LNG) plant,
coal loading, and tank farms are also proposed uses clustered adjacent
to the Port. Clearly, homes and major business or retail areas should
not be built directly adjacent to hazardous industries like 7 million
gallon tank farms, LNG plants or coal loading/storage facilities.

Since KABATA’s 2014 socio-economic consultant showed a new population
of nearly 7000 people in what the SW Borough Futures poster show as the
Port MacKenzie Port Industrial Area (i.e. zero population), it shows
that KABATA’s consultant understood the toll revenue need for a higher
population near the Bridge, and assumed that the current Mat-Su Borough
regulations on the Port MacKenzie Special Use District (and common
sense) would be overturned to allow residential use adjacent to
hazardous industrial uses. For the entire Port MacKenzie area,
AKDOT/KABATA’s consultant is showing over 5 times the population that
AKDOT estimated for the Wasilla Bypass project (see discussion below).

Whether it was big Borough populations in 2007, big retail in 2007,
massive business/retail in 2011, or “futuristic” townsites and putting
homes and businesses in industrial areas in 2014, it is clear that
AKDOT/KABATA’s consultants continue to manipulate the numbers to
generate the cash flow predictions needed to cover loan and bond
payments.

A “Fresh Start”? Or still getting predictions that don’t pass the “Smell Test”?

A review of the state checkbook reveals that KABATA and AKDOT spent
over $1.3 Million in the last two years on new studies by their
consultants Agnew:Beck, Cardno, Inc, and CDM Smith. Agnew:Beck and
Cardno, Inc of Portland, Oregon produced new population and employment
forecasts which were the inputs to CDM Smith’s new traffic and toll
revenue estimates. CDM Smith is the traffic and toll estimating firm
that was criticized in the 2013 Legislative Budget and Audit for
“undocumented” and “overly optimistic” assumptions that led KABATA to
promise a “fresh start” on new numbers.

In 2014, CDM Smith estimated that there would be an average of 40,700
trips a day on the bridge in 2040. That number is essentially
equivalent to the 36,000 trips a day CDM Smith projected for 2035 in
2012. (In analyzing the proposed Wasilla Bypass, HDR Inc. projected
only 9,400 trips a day bridge in 2035 even though HDR also had a high
number for Borough growth; their 188,000 people in 2035 is consistent
with KABATA’s 208,000 in 2040.) Because Mat Su’s annual population
growth has slowed down to 2.3% a year since the 2010 Census, a skeptic
might suggest that KABATA’s continued persistence in showing much higher
population, trip and toll forecasts compared than all other sources is
driven by KABATA’s continuing need to show enough revenue to cover
expected Bridge obligations.

Will Pt MacKenzie Be the State’s 2nd Largest City? KABATA’s Consultant vs KABATA

To project enough toll revenue to pay off proposed Bridge obligations
requires both a high future Mat Su population and job growth and also
requires that much of that growth will not be in the Borough’s current
Palmer-Wasilla core but rather moved southwest to Pt MacKenzie at the
proposed northern terminus of the bridge.

KABATA’s consultant HDR is in a unique position of creating
socio-economic predictions for other AKDOT projects. HDR’s
socio-economic predictions for those other AKDOT projects are in
conflict with the predictions by Cardno / Agnew::Beck for AKDOT/KABATA.
HDR put only 7,177 people at Pt MacKenzie in 2040; the AKDOT/KABATA
number is over 5 times higher or 37,074 people. AKDOT/KABATA also
projected twice the number of jobs in 2040 than HDR at Pt Mac: 8,930
jobs vs. 4,511. A 37,074 population at Point MacKenzie in 2040
(compared to only about 1,700 there today) would make Point MacKenzie
the state’s second largest city, if Juneau and Fairbanks don’t grow much
larger than their 31,000 residents each today.

Scott Goldsmith and Jamie Kenworthy took the local neighborhood (or
Traffic Analysis Zone (TAZ) in transportation parlance) job and
population estimates, and broke them into local regions to graphically
illustrate the major differences between the Borough’s official
transportation plan done by HDR and the numbers AKDOT/KABATA provided in
their federal TIFIA “Letter of Interest” loan application. The numbers
dramatically differ on where people will live and work in the future
Borough between the numbers provided by DOT to the feds and the
Borough’s officially adopted transportation plan. Click here for population distribution (PDF 3.5MB) and here for location of jobs (PDF 3.6MB).

Still Showing “Impossibly Derived Revenue”

In 2013, we provided testimony to the Legislature pointing out that
KABATA was counting on toll revenues from traffic that can only fit on a
4-lane bridge, while showing costs of financing and constructing only a
2-lane bridge. Those 4 years of “Impossibly Derived Revenue” are what
we call the “2-lane cost/4-lane revenue” problem with KABATA’s past and
current financial schemes. AKDOT/KABATA Project Leader Judy Dougherty
has testified that traffic volumes greater than 20,000 ADT will result
in congestion. The 2015 Knik Arm Crossing TIFIA applications included an
effort by CDM Smith to respond to our criticism, and to calculate just
how much that “congestion” will affect traffic volumes, but the
application still relies on unusual assumptions that are clearly not
based on reality: reference pages 5-13 and 5-14 and Table 5-10 in CDM
Smith’s 12/5/14 Toll and Revenue report[ Dead link- the KABATA website is no longer online ].

For some background, the FHWA Traffic Manual indicates that 22,500
Average Daily Traffic (ADT) is approximately the maximum that can fit on
a 2 lane road or bridge. Exactly how traffic fluctuates over the course
of a typical day is the factor that requires that “approximately the
maximum” caveat. CDM Smith makes the following statement on page 5-13 of
their 2014 Traffic and Revenue Study: “Hourly distributions of traffic
were prepared using a combination of the period forecasts and the time
of day pattern of traffic counted on the Glenn Highway. The hourly
distributions were constructed so as to match the AWDT forecast and the
AM and PM peak period forecasts. The hourly volumes (for the average
weekday) were then constrained to a maximum hourly flow rate of 2,500
vehicles per hour. This process resulted in a 4.8% reduction in the AWDT
for 2030, an 11.3% reduction in 2035 and a 16.7% reduction in 2040. The
time-of-day pattern of traffic under these conditions is quite unusual.
Traffic volumes increase to the maximum flow rate early in the morning
and stay at that level throughout the day.”

CDM Smith’s statement doesn’t explain just how unusual that kind of a
traffic pattern really is: Actual traffic patterns measured on the
Glenn Highway in 2008 at the 6 lanes of Glen Highway traffic at the
Anchorage Scalehouse had 38.55% of the typical South-Bound work-day
traffic occurring between 6 and 9 am. Similarly, the North-Bound traffic
had 38.20% of the day’s traffic that traveled between 3 and 6 pm. The
Glenn Highway traffic at the Eklutna Flats was similar, and the hourly
average traffic flows on that 4-lane highway give some good comparison’s
to KABATA’s predictions:

For the hours ending at 7, 8 and 9 am, there were 2,352, 1,903 &
1,370 average hourly flows (both directions), and 1,928, 2,619 &
2,721 for the hours ending at 4, 5 & 6 pm. That average hourly
traffic did not exceed 1,400 vehicles per hour for the remainder of the
morning and afternoon, up until the evening “rush hour”. Compare those
actual traffic patterns on a 4-lane highway to AKDOT/KABATA’s
predictions that “Traffic volumes increase to the maximum flow rate
(2,500 vehicles/hour) early in the morning and stay at that level
throughout the day” on a 2-lane bridge. Commuters already complain about
“rush hour” traffic on the 4-6-lane Glenn Highway at average hourly
vehicle counts that are close to, or less than the vehicle counts that
AKDOT/KABATA predicts will be able to fit on a 2-lane bridge! Not only
is CDM Smith’s predicted traffic pattern NOT based on “the time of day
pattern of traffic counted on the Glenn Highway”, the idea that their
2-lane bridge can sustain 2,500 vehicles per hour at any time is highly
questionable.

Interestingly, the 29,386 ADT from 2008 Glenn Highway Traffic
patterns are still basically representative of Glenn Highway Traffic
today. The ADT at the Eklutna Flats measuring station has stayed at
approximately 30,0000 ADT for the past 5 years. Clearly the Mat-Su
Borough is developing its own jobs, reducing the bedroom community
patterns of the past. The Alaska Division of Commerce backs up that
information with statistics showing that the percentage of Mat-Su
residents commuting outside of the Borough for work (including the North
Slope, etc) dropped from 55% in 2011 to 44% in 2015.

Table 5-10 on page 5-14 of CDM Smith’s 2014 Traffic & Revenue
forecast indicates that even with the “constraints on the hourly flow
rates”, their revenue forecast still asserts that they can have 33,300
average daily traffic fitting on a 2-lane bridge in 2045, which is
clearly not possible.

Furthermore, at 25,000 vehicles a day, if you use the 2008 hourly
traffic rates measured on the Glenn Highway to estimate the hourly rates
on the Knik Arm Bridge, there would be so many cars trying to use the
bridge during “rush hour” that traffic would backup more than a mile on
either side of the bridge. At 33,300 ADT there could be 6 mile backups
in the morning and evening peak hours.
The AKDOT/KABATA paid over a million dollars for the CDM Smith report and those Toll Revenues form the basis for their 2015 TIFIA finance plan[ Dead link- the KABATA website is no longer online ].
The peak-non-peak flow in Anchorage shows the toll revenue projected
over about 20,000 ADT is physically impossible. CDM Smith’s prediction
that “Traffic volumes increase to the maximum flow rate early in the
morning and stay at that level throughout the day” is a wholesale
invention of a new traffic pattern for Anchorage where peak hours and
non-peak hours have almost the same level of traffic and congestion.

The statement from the Citi financial plan pg. 3 sent to TIFIA, “Toll
Revenue for Phase I is capped at the facility capacity and only grows
by inflation adjustment to toll rates from when that point is achieved”
is demonstrably untrue, since the revenue estimates come from CDM Smith
Table 5-10 where up to 33,300 vehicles a day cross a 2 lane bridge that
has a capacity of only 20,000 ADT.

What Happens Next? Why the Federal Loan Could be Approved

KABATA has been turned down for a TIFIA loan seven times at the
preliminary “Letter of Interest” stage. However when the legislature
passed HB 23 in 2013, it changed the financial structure from a public
private partnership to a direct state finance structure. And it added language [archived copy here]
(37.15.260 1 g ) to have the Revenue Commissioner report annually to
the legislature, stating the amount of money that will need to be
appropriated to cover all Bridge obligations. That requirement is
considered by bond attorneys to trigger a “moral obligation” of the
state to cover all toll shortfalls.
In that scenario, the legislature would have a tough choice each
session: appropriate enough funds to cover all bridge obligations or
trigger a default by a state department and risk an almost certain
downgrade to Alaska’s Credit Rating.

With the expected toll shortfall apparently guaranteed by a state
that for now has a AAA credit rating, TIFIA loan examiners may not care
how accurate AKDOT/KABATA’s population and toll revenue projections are
since the state is essentially on the hook as the backup creditor. All
of AKDOT’s/KABATA;s cost estimates have been based on a design that is
only 35% complete. As that design works towards being 100% complete, the
cost increases that are “normal” for a mega project of this scale
(along with the toll shortfalls) means that IF the Kink Arm Bridge is
built, Alaska could easily be looking a $2 billion hit to the State
Budget.

TIFIA has told Congress that existing appropriations allow about $9
billion a year of project financing that covers up to one third project
costs or TIFIA funds can launch about $27 billion of projects a year. A
review of current letter of interest applications [archived copy here.]
shows there may be too few projects chasing too much money. So the
“Bridge to Nowhere” could have a fair chance of passing the letter of
interest phase and moving to the credit analysis phase that often leads
to loan approval.

Aides to the Governor have assured this blog’s writers that the Knik
Arm Crossing, like the Juneau Road and Susitna Dam, is in a “parking
lot” awaiting consideration only by future administrations. But the Transportation Commissioner’s endorsement of the project [ Dead link- the KABATA website is no longer online ] and the active status of the TIFIA loan request sends a different signal.

The question for Alaska is: IF the TIFIA loan is acquired, can
Alaska afford to spend $2 Billion on a bridge to nowhere in an era of $5
billion dollar deficits?

Governor apparently manages Department of Transportation and not Vice Versa; Bridge Project on the Ropes

January 26th, 2015

The flurry of activity around the Knik Bridge project in the
last two months has made two things clear: First, the Governor Walker
appears serious about taking the Bridge out of his capital budget
request; he ordered the Department of Transportation and Public
Facilities (DOT) stop spending funds on the project. Second, despite
attempted resistance from the Department, Walker remains in charge.

With oil below $50 a barrel, the Governor’s first step to getting
control of an approximate $3.5-4 billion state annual deficit came on
December 26, 2014 when the new Governor issued Administrative Order 271 OR archived copy here.
to stop spending non-obligated and unencumbered funds on six
megaprojects. Besides the Knik Arm Crossing, the other projects were the
Ambler Road, the Juneau Access Road, the Susitna-Watana Dam, the Kodiak
Launch Complex and the Alaska Stand Alone Pipeline project. See here for Governor Walker’s press release [ Dead link- the document is no longer online ].

The DOT Push Back that Failed

A January 5, 2015 memo - OR archived copy here -
from holdover DOT Commissioner Kemp to Governor Walker’s new Office of
Management and Budget Director, Pat Pitney with a copy to the Governor’s
Chief of Staff, Jim Whitaker boldly defended his department’s projects.
Kemp argued that both the Juneau Road and Knik Bridge were
“long-standing goals of the state” that represented a “cost-effective
opportunity.” He also said canceling both projects would “likely
trigger” the requirement to repay the estimated $73 million in federal
funds spent on the Knik Bridge and the $25 million in federal funds
spent on the Juneau Access project. By arguing that the Knik Bridge
could be funded by state and federal bonds and user fees, Commissioner
Kemp was, in effect, backing up the controversially optimistic toll
revenue forecast and implying the Bridge would have no impact on the
state’s budget.

The resistance of DOT bureaucracy to the apparent cancellation of the
two projects stood out among the other state departments and agencies
reacting to the suspended six megaprojects.

Critics of Commissioner Kemp’s reasoning were not long in coming out.- OR archived copy here.
With DOT’s estimated cost of the Bridge at $1 Billion (critics say
around $2 Billion), bridge critic Jamie Kenworthy said the mathematical
logic of Kemp’s reasoning was that if you had put five cents into a
project that did not make sense, should the other 95 cents follow?
Others pointed out when costs ballooned on Anchorage’s Highway to
Highway and the Knowles Coastal Trail extension projects, both were
canceled by the state and FHWA without the state having to repay the
federal funds expended. Faced with these past examples, DOT
Transportation spokesperson Jeremy Woodrow backed off his earlier claim
that refunding would be required, and instead admitted that past
repayment issues had been settled on a case by case basis.

On January 12 the Governor fired Commissioner Kemp. The Juneau Empire - OR archived copy here - and later the Alaska Dispatch - OR archived copy here - and the Fairbanks Daily News Miner - OR archived copy here -
quoted the Governor’s spokesperson Grace Jong who made clear that both
the Knik Bridge and Juneau Access projects were “on the block.”

The Subway Eminent Domain Fiasco: A DOT Left Hand/Right Hand Problem or an Out of Control Bureaucracy?

On January 8, 2015, DOT contractor HDR notified
the owners of the Subway business on Government Hill threatening that
if ”there is not some form of mutual agreement reached between the
parties within 14 days” regarding acquiring of their property lease for
Bridge right of way, the case would be referred to the Attorney General
for instigation of eminent domain proceeding to acquire Subway’s
interests in the property. The HDR letter copied Knik Bridge Director Judy Dougherty and the Attorney General’s Office.

The willingness of DOT to incur further legal and right of way costs
appeared to contradict both the Governor’s December Administrative Order
271 to halt further un-obligated spending and the Knik Arm Crossing and
Toll Authority’s (KABATA’s) November 14, 2013 Board resolution - OR archived copy here - to let existing businesses operate until the project’s plans were nailed down.

It’s not clear whether DOT leadership, including Central Region
Director Rob Campbell, knew that Knik Arm Crossing Director Judy
Dougherty was continuing steps to take to acquire property. But the
Governor reacted by canceling any further efforts to acquire more right
of way, remarking “let’s not go and start tearing down buildings and closing businesses” - OR archived copy here -
for the hypothetical project. It is not known if the Tesoro Station on
Government Hill received a similar eminent domain letter from DOT, as
their property is also slated for demolition, should the Knik Bridge
pass their financial and permitting hurdles.

Government Hill Community Council President Stephanie Kesler applauded the Governor’s decision
to cancel the eminent domain proceedings while pointing out that DOT
had still not canceled the contract to demolish two private homes and
the Sourdough Motel. She asked that the DOT employees who ignored the
Governor’s administrative order be held accountable. Senator Ellis
(D-Anc) described the attempted taking of two operating business as a
continuation of the Department’s “pattern of intimidation” of the neighborhood and Bridge opponents - OR archived copy here.

Summary: New Sheriff in Town and New Commissioner, but old legislature?

On January 23 the Governor announced[ Dead link- this document is no longer online ]that he had appointed former DOT Commissioner Marc Luiken to his former post- OR archived copy here.
A former Elmendorf Vice Commander, Luiken reportedly had been fired by
Governor Parnell after he had quantified the budget needed just to
maintain DOT’s transportation infrastructure and argued for the priority
of maintenance over new construction. While he had never publicly aired
his differences with the Governor and his transportation aide Randy
Ruaro, reports had circulated from aides that the Governor asked for
Luiken’s resignation when it became clear that Commissioner Luiken did
not share the Governor’s support for the megaprojects that had drawn
such enthusiasm from the Associated General Contractors and local
politicians, and particularly from the Mat-Su Borough.

On January 9, 2015, DOT proposed Amendment 13
to the Statewide Transportation Plan (STIP) that would drop the Knik
Arm Crossing from the STIP, and transfer those funds to other projects,
taking the necessary bureaucratic step of asking for public comment by
February 13 on the proposed amendment.

With these actions by the Governor and the Department of
Transportation, it has become clear that the Governor is focused on
cutting the capital budget and a Commissioner is now in place who shares
the new Governor’s priorities. But it is not clear whether the
legislature will go along with the Governor’s priorities.

On January 22, 2015 the joint Senate and House Transportation
Committees met to hear testimony and discuss the fate of the
megaprojects. The legislators’ general discussion neither endorsed nor
suggested trying to overturn the Governor’s decisions. Testimony from
the Acting DOT Commissioner included the information that $84.8 million
has been spent to date on the Knik Arm Crossing including $72.9 million
in federal funds.

Also on January 22, 2015, the AP’s Becky Bohrer reported[ Dead link- this article is no longer online ]
that the Senate Finance Committee had hired former Parnell Revenue
Commissioner and KABATA Board member Angela Rodell on a 4 month, up to
$100,000 contract, to provide advice on the retirement system, the gas
line, and the state’s bond rating. A year ago Rodell had instigated the
latest finance plan for the Bridge that proposed the state directly
finance the project and testified in favor of legislation that passed
committing state bonds to the project (contingent upon receipt of a
federal loan that KABATA had been turned down for six times). Without
the authority to incur further consultant costs, it appears that the
administration cannot now pursue the letter of interest loan
application.

But with the legislature now in session, the final story of the Knik Bridge project may not be over yet.

Parnell Administration Denies Records Appeal

November 24th, 2014

Reports Still Withheld: Consultants Hired for Data or Deliberations?

In what may be his final action on the Knik Arm Crossing project, on
November 19, 2014 Department of Transportation and Public Facilities Commissioner Patrick Kemp denied the administrative appeal
of Government Hill Community Council President Stephanie Kesler’s
Public Records Act request for release of the long promised
socioeconomic reports (see earlier posts below) on the project.

With the assistance of Assistant Attorney General David Jones and
Knik Arm Crossing Project Director Judy Dougherty, Commissioner Kemp stated the reports are still incomplete
and so Ms. Kesler’s June, and August 2014 PRA requests were not valid.
Per the schedule announced by KABATA in mid-2013, the
Cardno/Agnew::Beck socioeconomic report with new population and
employment forecasts was to be a three month project which was due to
complete over a year ago.

State records show both Cardno and CDM Smith have been paid a total
over $1.3 million by KABATA and the Department of Transportation in the
past two years, so it is not clear how just “chapters” and not the
entire studies were allegedly complete. What is clear is that the
reports are a necessary precursor to the revised federal TIFIA loan
letter of interest. Unfortunately, delay in providing those reports
severely limits opportunity for the public and local officials to
comment on the new population projection data, estimated toll revenue,
and the resulting revised financial plan before consideration of the
plan by federal officials during the TIFIA application process.

The Knik Bridge project has been turned down six times for a needed
federal TIFIA loan; the legislature’s commitment for state bonds and
future transportation funds for what DOT&PF continues to claim will
be a $894 million project, is contingent upon the receipt of an
approximate $343 M federal loan.

In denying the administrative appeal, the state argued
that it was entitled to the “deliberative process” case law exemption
from the state Public Records Act because the consultant work was in
effect embedded in the state’s decision making process. Commissioner
Kemp did not cite any information from existing contracts with the
consultants to back up the state’s claim that the consultants were to
play a part in the decision making process. Rather, the “Statement of Services” in the 2013 RFP done
for the revised population projections by KABATA made clear that the
chosen consultant was to produce “data” and for the consultant to
present their “findings” to the Department and the legislature.

When Knik Arm Crossing Project Director Judy Dougherty and the
consultants present to Anchorage Metropolitan Area Solutions (AMATS) and
Muni Planning and Zoning members on December 8, 2014, the public will
presumably learn for the first time about the new foundational
population and employment estimates for the project promised after a
scathing LB&A audit came out in April, 2013. KABATA signed an agreement
with AMATS in August, 2013 to provide AMATS socioeconomic data for the
scheduled 2015 update by AMATS of the 2040 Long Range Transportation
Plan (LRTP). Because, that data has not been shared with the Muni,
AMATS has had to hire a separate consultant to produce independent
revised population and traffic estimates to try to stay on schedule for
the revised LRTP due to be completed in 2015. As explained in earlier
posts, because the socioeconomic studies were not required to be
coordinated with each other, there will now likely be three different
assumptions used by the Mat-Su Borough, AMATS and DOT/KABATA for their
various transportation effort.

Countdown to More Transparency?

Stephanie Kesler has 30 days from the November 19, 2014 denial of
administrative appeal to take the Commissioner Kemp’s decision to the
state superior court. By then some of the reports information may be
released at the December 8 DOT presentation and there may be a new
Department of Transportation Commissioner who has a different
understanding of the state Public Records Act and more willingness to
share project data with the public and local officials.

After a scathing legislative audit identifying “unreasonably
optimistic” population and toll revenue projections, KABATA (Knik Arm
Bridge and Toll Authority) promised a fresh start with new socioeconomic
data and hired the team of Cardno/Agnew::Beck to make an independent
estimate of the region’s population and employment. That new
socioeconomic data was to have been completed by September 30, 2013,
over a year ago, per KABATA’s own press release (click here) - OR archived copy here. That due date continues to slip: The February, 2014 KABATA newsletter[ Dead link- the KABATA website is no longer online ]
promised the updated toll and revenue forecast would be available
“within weeks”. The new revised socioeconomic data was to provide the
background for a revised traffic and toll revenue forecast, but that
report was still missing at the end of April, 2014. Thus, the
legislature approved the project without having any assurance that there
would be sufficient toll revenues needed to pay off the necessary state
and federal bonds. The Bridge financing bill, HB 23, committed the
state to fund what KABATA estimates to be an $894 million cost to build a
2 lane bridge contingent upon receipt of a $341 M federal TIFIA loan
for which the state has been turned down for now six times.

In this article - OR archived copy here, the Alaska Dispatch summarized the dispute over the withheld reports.The original Public Request Act (PRA) for the studies was filed by Government Hill Community Council President Stephanie Kesler on June 11, 2014 and renewed August 20, 2014, and appealed to the Commissioner of the Department of Transportation and Public Facilities (DOT/PF) on October 7, 2014. In an October 10, 2014 response to the appeal,
DOT/PF acknowledged that by law the Department had 10 days but because
the Assistant Attorney General who was familiar with the project was
gone for two weeks, the response would likely to be delayed. From the
state’s denials of the PRA request it is not clear whether the reports
are complete or not. What may be likely is that the Cardno /
Agnew::Beck forecast of population and employment data was completed a
year ago. But Cardno, Inc may have forecasted lower numbers than
necessary to pay off the bonds, so the toll and revenue consultant CDM
Smith – the same firm criticized in the 2013 legislative audit – has had
to model a number of new traffic scenarios to get the number high
enough to show enough revenue to pay off the federal loan for which they
are applying.

Political skeptics may interpret the withholding of the reports for
which the two consulting firms were paid over $1.3 million in FY 13 and
FY 14 (click here - OR archived copy here)
as being dictated by the November 4 election. However the withholding
of the socioeconomic report may be driven by larger financial
considerations. To get the federal TIFIA loan upon which the project
depends, the project needs an “investment grade” toll and revenue
forecast. To pass that financial review the state must show that there
are sufficient population and traffic numbers to produce the tolls to
pay off the bonds on the proposed $341 M federal loan. Consequently,
hiding the data may prevent critics from questioning the state’s
numbers. Interestingly, DOT/PF recently stated that, “The change in
direction for how the project would be financed (ie. TIFIA and bonds)
changed the type of data and increased the amount of necessary
information than was originally planned under the previous P3 funding
method. As a result, the contractor and subcontractors have required
more time to generate the report.” That directly conflicts with the
testimony provided by Rep. Mark Neuman (R-Big Lake) during the March 12,
2013 House Transportation Committee hearing on HB23, where he stated that Standard & Poor had already provided an “investment grade” rating for the project.

Business chooses to dis-invest at property threatened by this Project without Financing

The only gas pumps on Government Hill have now been removed by
Tesoro, who apparently made the decision that it does not make business
sense to upgrade the station’s gas tanks while the Department of
Transportation threatens to acquire the station for the right of way for
the Bridge project.

The decision by Tesoro and its real estate landlord apparently caught
the neighborhood, the state, and the Alaska Railroad which has a long
term lease with the station’s owners off guard. Click here for the Alaska Dispatch article - OR archived copy here.

On November, 15, 2013 amidst an earlier kerfuffle with the
neighborhood over acquisition of neighborhood homes and businesses for a
project that lacked financing, KABATA issued a press release[ Dead link- the KABATA web site is no longer online ]
to highlight that the KABATA Board’s intent in “protecting the
interests of the subtenants to remain in possession until construction
begins.” As DOT spokeswoman Jill Reese, stated in the October 15, 2014 ADN article - OR archived copy here,
“We had no intention whatsoever of not continuing their lease, and then
not paying them for every bit of the relocation and expenses that they
would have had.” She added that such compensation is required by federal
law.

On Tuesday October 14, 2014 Melinda Gant, Vice President of the
Government Hill Community Council, spoke with Matt Gill, Tesoro’s
External Affairs Senior Manager. Mr. Gill stated that Tesoro was in the
midst of a company-wide initiative to replace their single-walled
underground tanks with double-walled underground tanks. However, Tesoro
received notice from Brauvin Real Estate (Tesoro’s landlord) that the
lease was being transferred from the Alaska Railroad to the Alaska
Department of Transportation as a part of the Knik Arm Crossing’s
right-of-way acquisition process. Mr. Gill then stated that given the
uncertainty cast by the Knik Arm Crossing, Tesoro could not justify the
investment in the double-walled tanks.

It appears that what economists call “uncertainty” has created a
disincentive for Tesoro to make a long term investment in upgrading the
business. While DOT’s public stance apparently commits the state to help
keep a functioning local businesses alive until the Right of Way is
needed, the practical effect for acquiring Right of Way before a large
project is financed, discourages new investment in local businesses and
leaves the neighborhood with no gas station in the interim.

Discontinuance of fuel sales by the Government Hill Tesoro is a
severe blow to the neighborhood, its businesses, Government Elementary
School and JBER. The station was almost always busy with vehicles
filling up. Neighbors, soldiers and airmen, school parents, AT&T
employees, business owners, and many others used that station. The
uncertainty imposed on the Government Hill Business District by the
potential lease transfer has had the direct effect of lost sales at this
location and a loss of economic choice by local residents and one would
imagine that Tesoro would like to recoup that lost business if
possible.

The Government Hill Community Council is currently working with the
DOT/PF and Tesoro to find a solution where the community can keep an
important feature of the business district fully operational by
providing the necessary “certainty” that had been taken away by DOT/PF’s
pre-mature actions on Right of Way.

During a site visit for potential demolition bidders on July
15th, over 50 local and city-wide protesters held signs and chanted
their opposition to demolition of viable homes in the Government Hill
neighborhood for an unfunded bridge. The Government Hill community is
an historic residential area and the oldest neighborhood in Anchorage.

On July 3rd, the Alaska Department of Transportation and Public
Facilities (ADOT) announced it would remove two homes and one former
business located in the path of the proposed Knik Arm Bridge even though
there is no likely financing for the bridge. The 164-page Specifications document[ Dead link- this document is no longer online ] for the estimated $500,000 to $1 million demolition project is available on ADOT’s website[ Dead link- this document is no longer online ].

Following passage of HB 23, signed by the governor on June 20, ADOT
took over nearly all Knik Arm Bridge and Toll Authority (KABATA) duties.
This proposed demolition is the first step by ADOT to pursue the
bridge in its new role. HB 23 requires the bridge to receive a low-cost
federal “TIFIA” loan for one-third of its $1.6 billion cost, however,
before the state can proceed with construction. KABATA has been turned
down five times for a TIFIA loan, which typically goes to congested
urban areas (e.g., Los Angeles, the Tappan Zee Bridge north of New York
City).

Government Hill Community Council President Stephanie Kesler
commented on the proposed demolition. “It is completely irresponsible
and fiscally wasteful for the state to demolish viable homes and
diminish our neighborhood for a project without a clear path for
funding. Today’s protest shows that our community and our many allies
are committed to fighting this bridge even if the properties are gone.
We will not roll over and move on.”

Dan Bonney, a retired career military leader from Eagle River, stated
that “Demolition of these properties is irreversible and foolhardy
absent likely federal funding for the Knik Arm Bridge. Without
overwhelming public benefits which I don’t see here, the state should
not override local concerns.”

Needed Right of Way? Or Demolitions to Create Facts on the Ground?

July 9th, 2014

Following a familiar public relations tactic to try to bury bad
news by releasing it right before a long holiday weekend, around 3 PM on
July 3rd, the Department of Transportation issued a press release - OR archived copy here announcing its intent to solicit bids to demolish 2 houses and the Sourdough Lodge on Government Hill.

The project is now dependent on a hard-to-get $300 million federal
loan that KABATA has been turned down for five times and whose
reapplication by the state is still pending. (Click here[ Dead link- this information is no longer online ]
to assess the Bridge’s national competition. Note how almost all
projects except the Knik Arm Bridge have had their reviews complete or
have been asked for more information.)

The two houses to be demolished are considered livable while the
Sourdough Hotel was a functioning business until KABATA acquired the
property. AKDOT has yet to acquire two other commercial properties and
enter into a long term lease for land owned by the Alaska Railroad.

With no financing plan in place for the project, and at least a year
before right-of-way would need to be in hand, it is not clear why the
state believes it necessary to demolish the structures soon for a
project with an uncertain future. The KTVA report[ Dead link- this report is no longer online ]
quoted Government Hills Community Council President Stephanie Kesler
who noted the irony of tearing down livable housing in a city with a
housing shortage.

Devin Kelly’s article - OR archived copy here today in the Anchorage Daily News quoted KABATA and now DOT spokeswoman
Shannon McCarthy saying it would be more expensive to secure or rent
the property than to demolish them now. Those statements, even if
accurate on an accounting basis, would have been irrelevant if KABATA
had waited for the project to be financed before acquiring the
properties.